Coromandel: Enhancement of Short-Term Finance Harvard Case Solution & Analysis

In the month of April 2015, Coromandel International Limited (CIL), a producer of fertilizers based in Chennai, India, requested that the National Bank of India increase CIL’s present short term finance arrangement. CIL ran 14 state of the art manufacturing facilities across India with a combined installed capacity of four million tonnes per annum and over 2,000 employees. Nonetheless, CIL was dependent on government subsidies and, because many of its raw materials had to be imported, was also dependent on a favorable foreign exchange rate.

Over the previous three years, four fertilizer businesses had been acquired by CIL as part of its growth strategy in inorganics. With drawn-out short-term financing, CIL could incorporate these companies get the most out of the resultant synergy. The state head of the Wholesale Banking Group was concerned that CIL’s request would exceed the bank’s prudential exposure limits in addition to the bank’s exposure norms on the fertilizer sector on just one borrower. Should the bank accept CIL’s request for enhanced short-term borrowing?

Learning Objective: This case can be instructed in advanced corporate finance courses in an MBA program, credit management, or corporate banking or in executive development programs meant for senior management personnel in banks and financial institutions. The goals of the case are:

To challenge pupils in the place of short term finance selections, including the demand to understand the impact of specific choices on benchmarks that are quantitative and qualitative parameters.

To evaluate short term lending by banks and financial institutions.

To understand risk management strategies in fertilizer businesses.

To identify the business’s strategy and to understand the concept of subsidy receivables in the Indian fertilizer industry, which is heavily regulated by the government.

Publication Date: 02/17/2016

This is just an excerpt. This case is about Finance

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